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CHAPTER 13 Quiz A Business Statistics, 2nd ed 13-1

Chapter 13: Testing Hypotheses – Quiz A


Name _______________________________

1. A company manufacturing computer chips finds that 8% of all chips manufactured are
defective. Management is concerned that high employee turnover is partially responsible
for the high defect rate. In an effort to decrease the percentage of defective chips,
management decides to provide additional training to those employees hired within the
last year. After training was implemented, a sample of 450 chips revealed only 27
defects. Was the additional training effective in lowering the defect rate?

a. Write the null and alternative hypotheses.

b. What is the value of the test statistic?

c. What is the associated P-value?

d. State your conclusion using α = .01.

2. A company that sells eco-friendly cleaning products is concerned that only 19.5% of
people who use such products select their brand. A marketing director suggests that the
company invest in new advertising and labeling to strengthen its green image. The
company decides to do so in a test market so that the effectiveness of the marketing
campaign may be evaluated.

a. Write the null and alternative hypotheses.

b. In this context, describe the Type I error possible. How might such an error impact the
company?

c. In this context, describe the Type II error possible. How might such an error impact
the company?

d. Based on data collected in the test market, the company constructed a 98% confidence
interval for the proportion of all consumers who might buy their brand. The resulting
interval is 16% to 28%. What conclusion should the company reach about the new
marketing campaign? Explain.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-2 CHAPTER 13 Quiz A Business Statistics, 2nd ed.

3. A large software development firm recently relocated its facilities. Top management
is interested in fostering good relations with their new local community and has
encouraged their professional employees to engage in local service activities. They
believe that the firm’s professionals volunteer an average of more than 15 hours per
month. If this is not the case, they will institute an incentive program to increase
community involvement. A random sample of 24 professionals reported the following
number of hours:

12 13 14 14 15 15 15 16 16 16 16 16
17 17 17 18 18 18 18 19 19 19 20 21

The sample has a mean of 16.6 hours and a standard deviation of 2.22 hours.

a. Write the null and alternative hypotheses.

b. In this context, describe the Type I error possible. How might such an error impact the
software development firm?

c. In this context, describe the Type II error possible. How might such an error impact
the software development firm?

d. What is the value of the test statistic?

e. What is the associated P-value?

f. State your conclusion using α = .05.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz A Business Statistics, 2nd ed 13-3

Chapter 13: Testing Hypotheses – Quiz A – Key

1. A company manufacturing computer chips finds that 8% of all chips manufactured are
defective. Management is concerned that high employee turnover is partially responsible
for the high defect rate. In an effort to decrease the percentage of defective chips,
management decides to provide additional training to those employees hired within the
last year. After training was implemented, a sample of 450 chips revealed only 27
defects. Was the additional training effective in lowering the defect rate?

a. Write the null and alternative hypotheses.

H 0 : p = 0.08 and H A : p < 0.08

b. What is the value of the test statistic?

z = -1.56

c. What is the associated P-value?

P-value = 0.0594

d. State your conclusion using α = .01.

At α = .01 we fail to reject the null hypothesis. At the .01 level of significance, we
cannot conclude that the additional training significantly lowered the defect rate.

2. A company that sells eco-friendly cleaning products is concerned that only 19.5% of
people who use such products select their brand. A marketing director suggests that the
company invest in new advertising and labeling to strengthen its green image. The
company decides to do so in a test market so that the effectiveness of the marketing
campaign may be evaluated.

a. Write the null and alternative hypotheses.

H0 : p = 0.195 and HA : p > 0.195

b. In this context, describe the Type I error possible. How might such an error impact the
company?

A Type I error would be concluding that the percentage of customers purchasing the
company’s brand has increased, when in fact it has not. The company would waste
money on a new marketing campaign that does not increase the percentage of customers
buying their brand.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-4 CHAPTER 13 Quiz A Business Statistics, 2nd ed.

c. In this context, describe the Type II error possible. How might such an error impact
the company?

A Type II error would be failing to detect an increase in the percentage of customers


buying the company’s brand, when in fact it has. The company would miss an
opportunity to increase the percentage of customers buying their brand.

d. Based on data collected in the test market, the company constructed a 98% confidence
interval for the proportion of all consumers who might buy their brand. The resulting
interval is 16% to 28%. What conclusion should the company reach about the new
marketing campaign? Explain.

The 98% confidence interval contains the hypothesized value of 19.5%. Therefore, at a
significant level of α = .02, the data do not provide convincing evidence that the
marketing campaign increases the percentage of customers for the company’s products.

3. A large software development firm recently relocated its facilities. Top management
is interested in fostering good relations with their new local community and has
encouraged their professional employees to engage in local service activities. They
believe that the firm’s professionals volunteer an average of more than 15 hours per
month. If this is not the case, they will institute an incentive program to increase
community involvement. A random sample of 24 professionals reported the following
number of hours:

12 13 14 14 15 15 15 16 16 16 16 16
17 17 17 18 18 18 18 19 19 19 20 21

The sample has a mean of 16.6 hours and a standard deviation of 2.22 hours.

a. Write the null and alternative hypotheses.

H0 : µ = 15 and HA : µ > 15

b. In this context, describe the Type I error possible. How might such an error impact the
software development firm?

A Type I error would be concluding that the average number of hours volunteered by the
firm’s professional employees is more than 15 hours, when in fact it is not. The firm
would miss an opportunity to increase community involvement among its professional
employees.

c. In this context, describe the Type II error possible. How might such an error impact
the software development firm?

A Type II error would be failing to detect that the average number of hours volunteered
by the firm’s professional employees is more than 15 hours, when in fact it is. The firm

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz A Business Statistics, 2nd ed 13-5

would waste money instituting an incentive program to increase community involvement


among its professional employees.

d. What is the value of the test statistic?

t = 16.6 – 15
2.22 / √24
t = 3.532

e. What is the associated P-value?

P-value = 0.0009

f. State your conclusion using α = .05.

We reject the null hypothesis. The firm shouldn’t need to institute an incentive program
because the evidence indicates that professional employees volunteer an average of more
than 15 hours per month in their local community.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-6 CHAPTER 13 Quiz B Business Statistics, 2nd ed.

Business Statistics: Chapter 13: Testing Hypotheses – Quiz B


Name ________________________________________

1. A report on the U.S. economy indicates that 28% of Americans have experienced
difficulty in making mortgage payments. A news organization randomly sampled 400
Americans from 10 cities named the “fastest dying cities in the U.S.” (Forbes Magazine,
August 2008) and found that 136 reported such difficulty. Does this indicate that the
problem is more severe among these cities?

a. Write the null and alternative hypotheses.

b. What is the value of the test statistic?

c. What is the associated P-value?

d. State your conclusion using α = .05.

2. Top management of a large multinational corporation wants to create a culture of


innovativeness and change. A consultant hired to assess the company’s organizational
culture finds that only 15% of employees are open to new ideas and approaches toward
their work. One of his recommendations is for the company to conduct seminars for
employees in order to disseminate and reinforce the new corporate philosophy. This is
done for a six month trial period after which its value in changing employee attitudes will
be assessed.

a. Write the null and alternative hypotheses.

b. In this context, describe the Type I error possible. How might such an error impact the
company?

c. In this context, describe the Type II error possible. How might such an error impact
the company?

d. Based on data collected after the trial period, the company constructed a 95%
confidence interval for the proportion of all employees open to new ideas and approaches
toward their work. The resulting interval is 18% to 22%. What conclusion should the
company reach about the seminars? Explain.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz B Business Statistics, 2nd ed 13-7

3. Insurance companies track life expectancy information to assist in determining the


cost of life insurance policies. Last year the average life expectancy of all policyholders
was 77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample some of their recently paid policies.
The insurance company will only change their premium structure if there is evidence that
people who buy their policies are living longer than before. The sample has a mean of
78.6 years and a standard deviation of 4.48 years.

86 75 83 84 81 77 78 79 79 81
76 85 70 76 79 81 73 74 72 83

a. Write the null and alternative hypotheses.

b. In this context, describe the Type I error possible. How might such an error impact
ABI Insurance?

c. In this context, describe the Type II error possible. How might such an error impact
ABI Insurance?

d. What is the value of the test statistic?

e. What is the associated P-value?

f. State your conclusion using α = .05.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-8 CHAPTER 13 Quiz B Business Statistics, 2nd ed.

Chapter 13: Testing Hypotheses – Quiz B – Key

1. A report on the U.S. economy indicates that 28% of Americans have experienced
difficulty in making mortgage payments. A news organization randomly sampled 400
Americans from 10 cities named the “fastest dying cities in the U.S.” (Forbes Magazine,
August 2008) and found that 136 reported such difficulty. Does this indicate that the
problem is more severe among these cities?

a. Write the null and alternative hypotheses.

H0 : p = 0.28 and HA : p > 0.28

b. What is the value of the test statistic?

z = 2.67

c. What is the associated P-value?

P-value = .0038

d. State your conclusion using α = .05.

At α = .05 we reject the null hypothesis. At the .05 level of significance, we can
conclude that the percentage of Americans in these cities experiencing difficulty making
mortgage payments is significantly higher than 28% (or that the problem is more severe).

2. Top management of a large multinational corporation wants to create a culture of


innovativeness and change. A consultant hired to assess the company’s organizational
culture finds that only 15% of employees are open to new ideas and approaches toward
their work. One of his recommendations is for the company to conduct seminars for
employees in order to disseminate and reinforce the new corporate philosophy. This is
done for a six month trial period after which its value in changing employee attitudes will
be assessed.

a. Write the null and alternative hypotheses.

H0 : p = 0.15 and HA : p > 0.15

b. In this context, describe the Type I error possible. How might such an error impact the
company?

A Type I error would be concluding that the percentage of employees open to new ideas
has increased, when in fact it has not. The company would waste money on seminars that
do not increase the percentage of employees with more innovative attitudes.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz B Business Statistics, 2nd ed 13-9

c. In this context, describe the Type II error possible. How might such an error impact
the company?

A Type II error would be failing to detect an increase in the percentage of employees


open to new ideas, when in fact it has. The company would miss an opportunity to
increase the percentage of employees with more innovative attitudes.

d. Based on data collected after the trial period, the company constructed a 95%
confidence interval for the proportion of all employees open to new ideas and approaches
toward their work. The resulting interval is 18% to 22%. What conclusion should the
company reach about the seminars? Explain.

The 95% confidence interval contains values that are all above the hypothesized value of
15%, so the data provide convincing evidence (at α = .05) that the seminars improved
employee’s attitudes toward innovativeness and change.

3. Insurance companies track life expectancy information to assist in determining the


cost of life insurance policies. Last year the average life expectancy of all policyholders
was 77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample some of their recently paid policies.
The insurance company will only change their premium structure if there is evidence that
people who buy their policies are living longer than before. The sample has a mean of
78.6 years and a standard deviation of 4.48 years.

86 75 83 84 81 77 78 79 79 81
76 85 70 76 79 81 73 74 72 83

a. Write the null and alternative hypotheses.

H0 : µ = 77 and HA : µ > 77

b. In this context, describe the Type I error possible. How might such an error impact
ABI Insurance?

A Type I error would be concluding that the average life expectancy has increased, when
in fact it has not. The company would change its premium structure when it was not
necessary.

c. In this context, describe the Type II error possible. How might such an error impact
ABI Insurance?

A Type II error would be failing to detect an increase in the average life expectancy,
when in fact it has. The company would miss an opportunity to change its premium
structure when it was necessary.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-10 CHAPTER 13 Quiz B Business Statistics, 2nd ed.

d. What is the value of the test statistic?

t = 78.6 – 77
4.48 / √20
t = 1.597

e. What is the associated P-value?

P-value = .063

f. State your conclusion using α = .05.

We fail to reject the null hypothesis. ABI Insurance shouldn’t need to increase their
premiums because there is little evidence to indicate an increase in average life
expectancy.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz C Business Statistics, 2nd ed. 13-11

Business Statistics: Chapter 13: Testing Hypotheses – Quiz C Multiple Choice

13.1. Identify the type of test.


1. A company manufacturing computer chips finds that 8% of all chips manufactured are
defective. In an effort to decrease the percentage of defective chips, management decides
to provide additional training to those employees hired within the last year. After
training was implemented, a sample of 450 chips revealed only 27 defects. A hypothesis
test is performed to determine if the additional training was effective in lowering the
defect rate. Which of the following statement is true about this hypothesis test?

A. It is a two tailed test about a proportion.


B. It is a one tailed test about a mean.
C. It is a one tailed test about a proportion.
D. It is a two tailed test about a mean.
E. None of the above.

13.4. Calculate the appropriate test statistic.


2. A company manufacturing computer chips finds that 8% of all chips manufactured are
defective. In an effort to decrease the percentage of defective chips, management decides
to provide additional training to those employees hired within the last year. After
training was implemented, a sample of 450 chips revealed only 27 defects. A hypothesis
test is performed to determine if the additional training was effective in lowering the
defect rate. The correct value of the test statistic is

A. z = -1.56
B. z = -2.57
C. z = 1.56
D. z = 1.96
E. z = -2.57

13.4. Make conclusions about the hypotheses.


3. A company manufacturing computer chips finds that 8% of all chips manufactured are
defective. In an effort to decrease the percentage of defective chips, management decides
to provide additional training to those employees hired within the last year. After
training was implemented, a sample of 450 chips revealed only 27 defects. A hypothesis
test is performed to determine if the additional training was effective in lowering the
defect rate. Suppose the P-value associated with the test statistic is 0.0594. At α = .01,

A. we can conclude that the additional training significantly lowered the defect rate.
B. we can conclude that the additional training did not significantly lower the defect
rate.
C. we can conclude that the additional training significantly increased the defect rate.
D. we can conclude that the additional training did affect the defect rate.
E. None of the above.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-12 CHAPTER 13 Quiz C Business Statistics, 2nd ed.

13.10. Identify and interpret types of error.


4. A company that sells eco-friendly cleaning products is concerned that only 19.5% of
people who use such products select their brand. A marketing director suggests that the
company invest in new advertising and labeling to strengthen its green image. The
company decides to do so in a test market so that the effectiveness of the marketing
campaign may be evaluated. In this context, committing a Type I error

A. occurs when they conclude that the percentage of customers purchasing the
company’s brand has increased when in fact it has not.
B. occurs then they conclude that the percentage of customers purchasing the
company’s brand has not increased when in fact it has.
C. would result in the company wasting money on a new marketing campaign that does
not increase the percentage of customers buying their brand.
D. Both A and C.
E. Both B and C.

13.9. Make conclusions based on confidence intervals.


5. A company that sells eco-friendly cleaning products is concerned that only 19.5% of
people who use such products select their brand. A marketing director suggests that the
company invest in new advertising and labeling to strengthen its green image. The
company decides to do so in a test market so that the effectiveness of the marketing
campaign may be evaluated. Based on data collected in the test market, the company
constructed a 98% confidence interval for the proportion of all consumers who might buy
their brand. The resulting interval is 16% to 28%. What conclusion should the
company reach about the new marketing campaign?

A. The data do not provide convincing evidence that the marketing campaign increases
the percentage of customers for the company’s products.
B. The data do provide convincing evidence that the marketing campaign increases the
percentage of customers for the company’s products.
C. The new marketing campaign is effective in increasing the percentage of customers
buying their brand.
D. The company should launch the new marketing campaign.
E. None of the above.

13.8. Find critical values.


6. Suppose that you are conducting a two tailed test about a proportion at the 0.01 level
of significance. The correct critical value(s) to be used in drawing a conclusion is (are)

A. ± 1.96
B. ±2.575
C. -1.645
D. ±1.645
E. 1.96

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz C Business Statistics, 2nd ed. 13-13

13.1. Write the hypotheses.


7. A large software development firm recently relocated its facilities. Top management
is interested in fostering good relations with their new local community and has
encouraged their professional employees to engage in local service activities. They
believe that the firm’s professionals volunteer an average of more than 15 hours per
month. If this is not the case, they will institute an incentive program to increase
community involvement. The correct null and alternative hypotheses to test the belief of
top management are

A. H0 : µ = 15 and HA : µ < 15
B. H0 : µ = 15 and HA : µ > 15
C. H0 : µ = 15 and HA : µ ≠ 15
D. H0 : µ ≠ 15 and HA : µ = 15
E. H0 : µ < 15 and HA : µ > 15

13.6. Calculate the appropriate test statistic.


8. A large software development firm recently relocated its facilities. Top management
is interested in fostering good relations with their new local community and has
encouraged their professional employees to engage in local service activities. They
believe that the firm’s professionals volunteer an average of more than 15 hours per
month. If this is not the case, they will institute an incentive program to increase
community involvement. A random sample of 24 professionals yields a mean of 16.6
hours and a standard deviation of 2.22 hours. The correct value of the test statistic for the
appropriate hypothesis test is

A. t = 3.532
B. t = -3.532
C. t = 1.223
D. t = -1.223
E. t = 0.789

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-14 CHAPTER 13 Quiz C Business Statistics, 2nd ed.

13.6. Make conclusions about the hypotheses.


9. A large software development firm recently relocated its facilities. Top management is
interested in fostering good relations with their new local community and has encouraged
their professional employees to engage in local service activities. They believe that the
firm’s professionals volunteer an average of more than 15 hours per month. If this is not
the case, they will institute an incentive program to increase community involvement. A
random sample of 24 professionals yields a mean of 16.6 hours and a standard deviation
of 2.22 hours. The P-value associated with the resulting test statistic is 0.0009. At α =
0.05, which of the following is the correct conclusion?

A. We reject the null hypothesis.


B. We fail to reject the null hypothesis.
C. The firm shouldn’t need to institute an incentive program because the evidence
indicates that professional employees volunteer an average of more than 15 hours per
month in their local community.
D. Both A and C
E. Both B and C

13.10. Identify and interpret types of error.


10. A large software development firm recently relocated its facilities. Top management
is interested in fostering good relations with their new local community and has
encouraged their professional employees to engage in local service activities. They
believe that the firm’s professionals volunteer an average of more than 15 hours per
month. If this is not the case, they will institute an incentive program to increase
community involvement. Based on data collected they perform the appropriate
hypothesis test. A Type II error in this context means

A. they failed to detect that the average number of hours volunteered by the firm’s
professional employees is more than 15 hours when in fact it is.
B. they would decide not to institute an incentive program to increase community
involvement when they should have.
C. they would waste money instituting an incentive program to increase community
involvement among its professional employees that was not needed.
D. Both A and B.
E. Both A and C.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz C Business Statistics, 2nd ed. 13-15

Chapter 13: Testing Hypotheses – Quiz C – Key

1. C
2. A
3. B
4. D
5. A
6. B
7. B
8. A
9. D
10. E

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-16 CHAPTER 13 Quiz D Business Statistics, 2nd ed.

Business Statistics: Chapter 13: Testing Hypotheses – Quiz D Multiple Choice

13.1. Write the hypotheses.


1. A report on the U.S. economy indicates that 28% of Americans have experienced
difficulty in making mortgage payments. A news organization randomly sampled 400
Americans from 10 cities named the “fastest dying cities in the U.S.” (Forbes Magazine,
August 2008) and found that 136 reported such difficulty. Does this indicate that the
problem is more severe among these cities? The correct null and alternative hypotheses
for testing this claim are

A. H0 : p = 0.28 and HA : p > 0.28


B. H0 : p = 0.28 and HA : p < 0.28
C. H0 : p = 0.28 and HA : p ≠ 0.28
D. H0 : p ≠ 0.28 and HA : p = 0.28
E. H0 : p > 0.28 and HA : p = 0.28

13.4. Calculate the appropriate test statistic.


2. A report on the U.S. economy indicates that 28% of Americans have experienced
difficulty in making mortgage payments. A news organization randomly sampled 400
Americans from 10 cities named the “fastest dying cities in the U.S.” (Forbes Magazine,
August 2008) and found that 136 reported such difficulty. Does this indicate that the
problem is more severe among these cities? The correct value of the test statistic for
testing this claim is
A. z = -1.28
B. z = -2.67
C. z = 2.67
D. z = 1.96
E. z = -1.28

13.4. Make conclusions about the hypotheses.


3. A report on the U.S. economy indicates that 28% of Americans have experienced
difficulty in making mortgage payments. A news organization randomly sampled 400
Americans from 10 cities named the “fastest dying cities in the U.S.” (Forbes Magazine,
August 2008) and found that 136 reported such difficulty. Does this indicate that the
problem is more severe among these cities? The P-value associated with the test statistic
for testing this claim is 0.0029. At α = .05,

A. we can conclude that the percentage of Americans in these cities experiencing


difficulty making mortgage payments is significantly higher than 28%.
B we can conclude that the percentage of Americans in these cities experiencing
difficulty making mortgage payments is significantly lower than 28%.
C. we can conclude that the percentage of Americans in these cities experiencing
difficulty making mortgage payments is not significantly different from 28%.
D. we can conclude that the percentage of Americans in these cities experiencing
difficulty making mortgage payments is equal to 28%.
E. None of the above.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz D Business Statistics, 2nd ed. 13-17

13.1. Write the hypotheses.


4. Top management of a large multinational corporation wants to create a culture of
innovativeness and change. A consultant hired to assess the company’s organizational
culture finds that only 15% of employees are open to new ideas and approaches toward
their work. Consequently the company conducts a program for employees in order to
reinforce the new corporate philosophy. After the program is completed, employees are
surveyed to see if a greater percentage is now open to innovativeness and change. The
correct alternative hypothesis is

A. p = 0.15
B. p > 0.15
C. p < 0.15
D. µ > 0.15
E. µ ≠ 0.15

13.10. Identify and interpret types of error.


5. Top management of a large multinational corporation wants to create a culture of
innovativeness and change. A consultant hired to assess the company’s organizational
culture finds that only 15% of employees are open to new ideas and approaches toward
their work. Consequently the company conducts a program for employees in order to
reinforce the new corporate philosophy. After the program is completed, employees are
surveyed to see if a greater percentage is now open to innovativeness and change.
Suppose that based on the sample results the company rejects the null hypothesis when in
fact it is true. Which of the following statements is correct?

A. This is known as a Type II error.


B. This is known as a fatal error.
C. This led to the conclusion that the percentage of employees open to new ideas did not
increase when in fact it did.
D. This led to the conclusion that the percentage of employees open to new ideas did
increase when in fact it did not.
E. This led to a P-value that was greater than the level of significance.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-18 CHAPTER 13 Quiz D Business Statistics, 2nd ed.

13.9. Make conclusions based on confidence intervals.


6. Top management of a large multinational corporation wants to create a culture of
innovativeness and change. A consultant hired to assess the company’s organizational
culture finds that only 15% of employees are open to new ideas and approaches toward
their work. Consequently the company conducts a program for employees in order to
reinforce the new corporate philosophy. Based on data collected after the program, the
finds the 95% confidence interval for the proportion of all employees open to new ideas
to be 18% to 22%. What should the company conclude?

A. The null hypothesis should not be rejected.


B There is no evidence to suggest that the program improved employees’ attitudes
toward innovativeness and change.
C. There is evidence that the program improved employees’ attitudes toward
innovativeness and change.
D. Both A and B.
E. Both A and C.

13.1. Identify the type of test.


7. Insurance companies track life expectancy information to assist in determining the cost
of life insurance policies. Last year the average life expectancy of all policyholders was
77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample some of their recently paid policies.
The insurance company will only change their premium structure if there is evidence that
people who buy their policies are living longer than before. Which of the following
statement is true about this hypothesis test?

A. It is a two tailed test about a proportion.


B. It is a one tailed test about a mean.
C. It is a one tailed test about a proportion.
D. It is a two tailed test about a mean.
E. None of the above.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


CHAPTER 13 Quiz D Business Statistics, 2nd ed. 13-19

13.1. Write the hypotheses.


8. Insurance companies track life expectancy information to assist in determining the
cost of life insurance policies. Last year the average life expectancy of all policyholders
was 77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample some of their recently paid policies.
The insurance company will only change their premium structure if there is evidence that
people who buy their policies are living longer than before. The correct null and
alternative hypotheses are

A. H0 : µ = 77 and HA : µ > 77
B. H0 : µ = 77 and HA : µ < 77
C. H0 : µ = 77 and HA : µ ≠ 77
D. H0 : p = 77 and HA : p > 77
E. H0 : p = 15 and HA : p < 77

13.6. Calculate the appropriate test statistic.


9. Insurance companies track life expectancy information to assist in determining the
cost of life insurance policies. Last year the average life expectancy of all policyholders
was 77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample 20 of their recently paid policies.
The sample has a mean of 78.6 years and a standard deviation of 4.48 years. What is the
value of the test statistic?

A. 1.896
B. 2.355
C. 1.987
D. 2.176
E. 1.597

13.6. Make conclusions about the hypotheses.


10. Insurance companies track life expectancy information to assist in determining the
cost of life insurance policies. Last year the average life expectancy of all policyholders
was 77 years. ABI Insurance wants to determine if their clients now have a longer life
expectancy, on average, so they randomly sample 20 of their recently paid policies. The
sample has a mean of 78.6 years and a standard deviation of 4.48 years. The P-value
associated with the resulting test statistic is 0.063. At α = 0.05, which of the following is
the correct conclusion?

A. We fail to reject the null hypothesis.


B. We reject the null hypothesis.
C. There is not significant evidence to indicate an increase in average life expectancy.
D. Both A and C.
E. Both B and C.

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


13-20 CHAPTER 13 Quiz D Business Statistics, 2nd ed.

Chapter 13: Testing Hypotheses – Quiz D – Key

1. A
2. C
3. A
4. B
5. D
6. C
7. B
8. A
9. E
10. D

Copyright © 2012 Pearson Education, Inc. Publishing as Addison-Wesley.


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